Examining M&A: A Look at SeaWorld & Six Flags

by Cecilia Li He, MBA ‘14 (5/27/13)

Another fun fact about the Investment Banking Immersion is that you will spend time dedicated to studying one company and one industry. You will stay up-to-date on the company and any industry-related news. Our last project of the semester included evaluating the possibility for SeaWorld to acquire Six Flags, as Six Flags has complementary business to SeaWorld, and it just issued an IPO.
We were required to do side-by-side analysis of two companies’ business, including their business models, product offerings, and location concentrations. We also had to complete a brand analysis. Although IBI is all about finance, having a thorough knowledge about the company is definitely necessary and sometimes it is more important than valuation model itself.

Our immersion director, Drew Pascarella, reinforced the importance of industry knowledge by sharing his experience in Citi TMT group. Then we started to build the M&A models and conduct accretion / dilution analysis, which is the most crucial part of an M&A transaction. After finishing our quantitative and qualitative analysis, we needed to come up with a final recommendation to SeaWorld. We had much to consider in our recommendation because so many factors were involved, such as Six Flags’ highly levered balance sheet, the theme park industry’s future growth opportunities, SeaWorld’s own strategy, as well as Six Flags investors’ possibilities to vote yes for this possible acquisition.

I personally enjoyed this case very much. One week after we finished the case and had our own valuation for Six Flags, Six Flags was successfully listed on the NYSE, and it turned out to be a very successful IPO, as the stocks were over-subscribed and the price was on the high end of its pricing range. When I read the related news about the Six Flags’ IPO, I was surprised to see the difference between the IPO price and my own valuation.

As an international student, it is always fascinating to see how the M&A dynamic works in the U.S. capital market. One of my biggest takeaways from IBI is that I thoroughly understand why the U.S. capital market is the most sophisticated place in the world for IPO and M&A. Not only because this country has its well-developed law system, accounting, and banking system to ensure capital market operation, but also because the company executives truly believe M&A is an effective way to compete and survive. Though it might seem obvious to many people, for international students like me, it is truly impressive.

This is the last piece I’ll be writing about my first-year IBI experience, and when I look back on my first entry, I feel so fulfilled because I think I achieved a lot. Now I am interning in a boutique investment bank for the summer, and I can say with much confidence that the IBI can help prepare you for the challenges you may meet as a summer associate.